Board likely to be ousted
DNO wins bitter battle for Faroe Petroleum with raised offer
Faroe’s board said the bid undervalued the company
Norwegian oil company DNO has secured control of Faroe Petroleum after last night raising its hostile bid for the Aberdeen company to £641.7 million.
It announced it had received acceptances from 52.44% of shareholders, ending a bitter battle that began when DNO bought a stake in the British firm in April last year.
It raised the offer from 152p per share to 160p after the market closed last night, lifting the original valuation of £608m which Faroe said significantly undervalued the business.
Faroe said today it would recommend DNO’s improved offer to its shareholders, even though analysts opposed to the bid continued to claim that the bidder had got the company on the cheap.
In a statement, it said: “Whilst the Board does not believe the Final Offer represents fair value, the board recognises that…the offer will be declared wholly unconditional upon settlement of the further share purchases made by DNO and DNO will therefore acquire statutory control of Faroe.”
Broker Peel Hunt said DNO “won’t be applauded for their cheap takeover of a quality business.”
DNO, which returned to the North Sea in 2017, will cancel the Faroe’s AIM listing once it controls 75% of voting rights linked to Faroe shares.
Faroe, which operates in the Norwegian North Sea, expects to produce between 12,000 and 14,000 barrels per day in 2018, while DNO’s output in the third quarter was around 81,500 barrels of oil equivalent on a company working interest basis.
In what became an increasingly bitter battle for control of Faroe’s assets, Bijan Mossavar-Rahmani, DNO executive chairman, last night insisted the company would not “overpay” but had listened to the market and was prepared to increase its 26 November offer.
However, it intends to remove those Faroe directors who resisted the offer.
The final offer price represents a premium of 52.4% to Faroe’s share price of 105p at the close of business on 3 April 2018, the last business day before DNO announced its first acquisition of shares in Faroe.
It is also a premium of 27.2% to Faroe’s share price of 125.8p at the close of business on 23 November, the last business day before the announcement of the offer.
The revised price still falls short of a valuation calculated by Gaffney, Cline & Associates. It claimed a valuation of 186p to 225p a share.